Nigeria’s struggle with revenue shortfalls has continued on its downward trajectory that has left the federal, state and local governments gasping for air due to the resulting financial crisis.
A report by The Cable shows that in August, the federation’s revenue dropped by N371 billion to N885.5 billion, according to the monthly Federation Accounts Allocation Committee (FAAC)’s report released by the office of the accountant-general of the federation on Friday.
The revenue drop, which is the lowest in three months, falls significantly short when compared with the preceding months. In the last two months, the country’s revenue topped N1 trillion, with N1.22 trillion and N1.26 trillion recorded in June and July respectively.
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According to the report, the revenue shortfall represents a 29% dip in the monthly revenue when compared to July 2022 and 24 percent when compared to June 2022.
The report said the statutory revenues amounted to N654.36 billion, while value-added tax increased from N190.26 billion in July to N231.17 billion in August. Statutory revenues include collections by Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria Customs and others.
The poor revenue impacted FAAC distribution for the month. The revenue distributed among the three tiers of government slumped by N280.948 billion to N673.137 billion when the N954.085 shared in July is not taken into account.
The federal government took the lion share, N259.641 billion; states received N222.949 billion, while the local government councils received N164.247 billion.
This underlines the depth of Nigeria’s revenue crisis that has forced the country to significantly increase its debt portfolio since 2015. The Africa’s largest economy is largely oil-based, but has struggled to cash in on the oil windfall orchestrated by Russia-Ukraine conflict. This is as a result of issues ranging from oil theft, pipeline vandalism and the importation of refined products.
With the remedy of the oil revenue shortfalls being borrowing, Nigeria’s total public debt has risen to N42.80 trillio, stirring concern that the country is heading into serious debt problem even though the Minister of Finance Zainab Ahmed has repeatedly allayed fears about the growing debt profile.
On Friday, Ahmed, while speaking at the Nigeria International Economic Partnership Forum in New York, said Nigeria only has a revenue problem, not a debt problem. She said that at $100.1 billion or N14.6 trillion “Nigeria’s debt is 24 percent of the nominal GDP and below 40 percent threshold set in the debt management strategy”.
“Nigeria operates a four-year rolling medium-term strategy which guides the borrowing strategy of the federal government. And we have specific indices that we closely monitor. The public debt that we set is 40 percent, and we are at 24 percent,” she had said.
However, experts are worried that downplaying the impact of Nigeria’s growing debt profile will only exacerbate the economic strains, especially in the future. The non-oil sectors of the economy – farming, ICT etc have failed to make up for the gap created by the drop in oil revenue. This has resulted in the federal government borrowing to service debts.
Earlier this month, the Minister told Senate Committee on Finance that Nigeria’s 2023 budget is expected to have a N12.43 trillion deficit due to import duty waivers and fuel subsidy payments, amplifying the concern that the country’s poor revenue situation will continue to affect governance in the future.